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Dynamic Business Modelling for Sustainability:
Exploring a Systemic Design Perspective
Federico Cosenz
University of Palermo, Italy
Vinícius P. Rodrigues [viniciuspr1@insper.edu.br]
Insper, São Paulo, Brazil
Technical University of Denmark, Lyngby, Denmark
Francesco Rosati
Technical University of Denmark, Lyngby, Denmark
Abstract
The design of business models for sustainability has gained increased attention recently.
A common understanding of the principles and requirements for the development
sustainability-oriented business model is sought. Literature has endeavoured into a
profound analysis of design tools for business models. Results show methodological gaps
that could be potentially addressed by further development. Within such context, the aim
of this work is to contribute towards exploring how a dynamic approach to sustainability-
oriented business modelling may overcome such gaps. The proposed approach uses a
systemic design perspective derived from the combination between the original Business
Model Canvas and System Dynamics modelling.
Keywords: business models for sustainability, dynamic business modelling, system
dynamics.
Introduction
The emerging field of business models for sustainability (BMfS) have been steadily
gaining attention from scholars and practitioners, with scientific conferences and journals
encouraging the development of the debate on their design, use and innovation processes
(Foss & Saebi, 2017). Recent studies highlighting the relevance of BMfS explored the
state-of-the-art in the field, bringing out principles, criteria, and tools related to BMfS
development, as well as design requirements, methodological gaps and shortcomings of
the extant modelling approaches (Breuer et al., 2018; Lüdeke-Freund et al., 2019;
Dentchev et al., 2018).
The research process presented in this paper begins with the review of the literature on
BMfS design tools. This review is combined with an examination of existing approaches
which make use of a systemic design approach to model BMfS. Thus, it offers a wide
overview on the state of the art wherefrom to draw insights towards identifying
methodological shortcomings and for ultimately comparing findings.
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Given the multi-dimensional and complex nature of sustainability (Laasch, 2018), the
process of designing business models to represent sustainable value adequate becomes a
challenge (Biloslavo, Bagnoli, & Edgar, 2018). Furthermore, the extant modelling and
design methods for business models are limited and rarely geared towards sustainable
value (Evans et al., 2017).
As business models ultimately establish and define several of the relationships among
actors across a value network in constantly changing (dynamic) setup, simulation is
required in order to reveal accurate systemic decision-making (Täuscher & Abdelkafi,
2017). Drawing on these findings and with a view to overcoming the main critical issues
affecting the development of BMfS, this paper aims at conceptualizing and investigating
a systemic approach for designing BMfS wherein sustainable value elements (i.e.,
environmental, social and economic/financial) may coexist and interact forming causal
feedback structures able to frame value generation processes.
Research Design
Within such context, a four-step design approach has been defined, as shown in the
schematic representation of Figure 1. The process starts with a review of the literature on
business models (BM) design tools (step 1). This particular review is combined with an
investigation into existing approaches that makes clear use of a systemic design
perspective to derive business models, with a particular emphasis on tools for
sustainability-oriented modelling. This step offers a wide overview on the state of the art.
From there, methodological shortcomings in the currently available tools are identified
(step 2).
Building on this literature review, an approach named Dynamic Business Modelling
for Sustainability (DBMfS) is conceptualized as a lean systemic method to model and
explore the process of creating sustainable value (step 3). Finally, a critical analysis was
performed in order to understand the main potential areas for improvement in the
proposed approach, as a way to inform next steps in this research stream (step 4).
Figure 1 – The four-step research design
Results and Discussion
As emerged from the literature review, current design tools and approaches for
developing BMfS seem to generally display three main severe limitations, namely (i) the
main outputs (i.e., innovation ideas) originated from business modelling activities are not
followed up; (ii) there is a persistent lack of implementation of BMfS and (iii) business
models implemented by companies typically fail when exposed to the market
(Geissdoerfer et al., 2018). This is mainly caused by the complex and dynamic nature of
BMfS and its implementation (Abdelkafi & Täuscher, 2016; Demil & Lecocq, 2010;
Evans et al., 2017). Namely, such a dynamic complexity characterizes BMfS as living
structures, with a wealth of interactions and complementarities that can be framed through
feedback loops (Abdelkafi & Täuscher, 2016; Hjorth & Bagheri, 2006; Sterman, 2000),
thus capturing sustainability from a systemic perspective (Abdelkafi & Täuscher, 2016;
Boons et al., 2013; Lozano, 2018).
There seems to be an underlying requirement that underpins the logic of these design
tools and approaches for BMfS: innovation must be focused on producing social and/or
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environmental benefits. This focus prescribes a shift of value proposition to explicitly
address and encompass the society and the environment (Bocken et al., 2014; Stubbs &
Cocklin, 2008). Furthermore, Breuer et al. (2018) emphasize the need to expand
traditional organizational boundaries in alignment with a systemic perspective. The
underlying rationale of this expansion is to integrate a multitude of stakeholders and make
better use of resources, both internal and external, such as knowledge and information.
By considering a wider perspective of sustainable value creation, with multiple
stakeholders, companies not only considerably reduce risks, but also mitigate the effects
of potential tensions across the stakeholder network. Collaborative modelling techniques
are proved to be effective for engaging multiple stakeholders into one shared and common
perspective. (Rouwette, 2011). As a complement to this idea of active stakeholder
engagement and management, scholars and practitioners consider the BMfS to be an
extremely useful tool for examining the sustainability and viability of a business,
supported by a selected set of key performance measures. More rigorous empirical
approaches for collecting data and measuring performance should then reflect the
potential differences between planned and actual business models, and potential
unrealized activities (Dentchev et al., 2018).
The approach proposed in this paper builds upon the combination of the (i) modified
Sustainable Business Model Canvas (Osterwalder & Pigneur, 2010) proposed by Bocken
et al. (2018) and the (ii) System Dynamics (SD) modelling approach (Cosenz, 2017;
Cosenz & Noto, 2018). Figure 2 displays a generic schematic representation of the
proposed design approach. The methodological support provided by SD has proven to be
effective in modelling and analyzing business systems characterized by dynamic
complexity and unpredictability, as well as in experimenting with the models to design
and test strategies for performance management, sustainable development, and change
(Morecroft, 2007, 2013; Torres et al., 2017; Sterman, 2000; Bianchi, 2016; Videira et al.,
2010).
Figure 2 – Schematic representation of the Dynamic Business Modelling for
Sustainability (DBMfS)
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The proposed DBMfS expands the model’s dimension of key partners by
contemplating other relevant stakeholders (Bocken et al., 2015; Bocken et al., 2018).
Additionally, the perspectives of customer relations, distribution channels and key
activities are then unified in the key processes dimension. Furthermore, the core concept
of value proposition is divided into sub-categories which individually addresses (i) value
drivers, i.e. those critical factors influencing key processes and therefore providing
mechanisms for achieving competitive edges, (ii) outputs, i.e. short-term results achieved
by the company and, finally, (iii) outcomes, i.e. long-term results that displays broader
impact within and beyond the reach of where the company actually operates. These
outcomes are further sub-categorized into (a) social value, (b) economic value and (c)
environmental value in order to frame the sustainable value dimensions better. Each sub-
category in the value proposition embraces a set of indicators to measure the firm’s
performance according to the multidimensional perspective of sustainable value (Evans
et al., 2017; Dentchev et al., 2018; Bocken, 2015; Bocken et al., 2018).
With a view to addressing design limitations and conform with the requirements for
business model development (Bocken et al., 2014; Breuer et al., 2018; Dentchev et al.,
2018), the methodological structure provided by System Dynamics modelling approach
allows for the charting and quantification of the causal links among elements of the
business model, in close alignment with a systemic and endogenous perspective. The
attributes proving the effectiveness of this simulation method for the design of BMfS are
also associated with the rationale geared towards understanding how results emerge from
different inputs in a complex setting that is particularly full of causal loops (Davis et al.,
2007; Torres et al., 2017). These elements are compliant with the pragmatic approach
required by the research on design of BMfS (Bocken et al., 2014; Breuer et al., 2018;
Dentchev et al., 2018). With this, the proposed DBMfS, based on a SD approach, may
offer profounder understanding of how specific conditions may affect business
performance.
Conclusion
This approach contributes to sustainable business model research by conceptualizing a
systemic and holistic design tool which frames environmental, social and economic
drivers of value generation into a unique business model causal feedback structure.
For researchers, the study offers new streams of research for simulation-based and
dynamic business modelling tools to be enhanced and developed. For practitioners, the
conceptualization of the DBMfS approach adds value to how a company's business model
can be properly understood, adapted and changed over time in order to create sustainable
value, with its three distinguished components. The study also shows how decision-
makers can make use of the DBMfS to develop scenarios and "what-if" analysis.
For policy-makers, the proposed DBMfS might potentially aid the development of
targeted sustainability-related policies based on the substance of value created by specific
initiatives. Different industrial sectors or types of organizations might respond differently
to sustainability inputs in terms of performance, thus supporting the development of
context-specific policies for the development of BMfS.
Several topics for future research can be explored. In order to fully explore the
potential put forth by the proposed approach, next research efforts could focus on (i)
developing a quantitative approach based on the concept of the DBMfS in order to
simulate the different scenarios for the business models; (ii) designing an empirical data
collection protocol to test the efficacy of the DBMfS, and (iii) defining and structuring
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the types of data that are required in order to fully develop the quantitative frame of the
DBMfS.
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